The Public Liability Insurance Blog

Beer tax part 1: The view from inside the industry

Running a pub is steadily getting harder. Statistics from the Campaign for Real Ale (CAMRA) state that a staggering 18 pubs are calling their very last orders every week with the blame for this laid at the feet of harsh market conditions, a hostile economy, and an ever increasing tax on alcohol. With a highly successful e-petition demanding the government rethink their beer tax escalator strategy resulting in a high profile debate in the houses of parliament a couple of weeks ago, we wanted to talk to someone with a working knowledge of the industry to see what their experiences were.

NagsDavid Gough is the landlord of The Albany in Guildford and has been in the pub and restaurant business for more than 20 years. He has owned five pubs in both town centres and rural locations and has a wide range of experience across the industry having worked in branded restaurants, gastro pubs, nightclubs, fine dining restaurants and traditional boozers in a variety of capacities. He agrees that it is getting progressively harder to keep a pub running.

“Every budget brings bad news for the pubs trade with tax rises impacting on stock prices, minimum wage affecting wages costs and energy costs rising all the time,” explains David.

It’s more than just rising taxes and stock prices that are making it difficult though. Other market trends are working against smaller independent local pubs. “The voucher driven promotions all the big restaurant brands have introduced means people don’t go out now without checking if they can use a voucher first,” he adds. “Pubs are making nearly 5% less in margin to try and compete with the big boys.”

OldRising prices has taken the cost of beer up with it. David explained that traditionally, ales at more than £3.50 are frowned on in the trade, but even with this increase and with the £4 pint being commonplace, pubs are still losing ground on their profit margins. Landlords just cannot make the money they used to be able to and as well as rising stock prices, the fact that new tenants struggle to get approval for loans has also had an impact on the industry as a whole.

“In the past, the comfort would come from knowing there was some value in the lease. Currently leases that used to be worth £150,000 on the open market are being valued as low as £50,000 because new tenants can’t get loans,” said David. “with so many pubs available for free, the value has plummeted.”

Landlords looking to stay in business can however follow some simple pieces of advice to help them survive. David recommends some basic marketing principles and client relationship building tactics. “We built a database from our loyal customer base and continue to promote to and build on that database,” David explains. “Try and deliver simple and consistent value for money products and customers will trust you and be loyal.”

Even in these tough times for the pub trade, there does appear to be a glimmer of hope and a light at the end of the tunnel. In part two of this two-part-series of blog posts, we’ll look at what was discussed in last week’s parliamentary debate on the beer tax escalator and where the government could be going from here.

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